Tuesday, 23 June 2015

"I am AirAsia X... The Destroyer of Wealth"

The glamour and attraction of an airline! And especially an internationally recognised brand name associated with someone toasted as being `Malaysia's greatest entrepreneur'. And the best thing since the invention of Roti Canai.

AirAsia X (AAX) - a company that had created millions for its original shareholders upon its IPO and listing on Bursa Malaysia. But later destroying the capital of many others - people who had bought into the legendary Tony Fernandes' much-vaunted business and managements skills.

Glamer, Gelama... Tak rasa attracted ke with this image that evokes `success', `savvy', `allure' ? AirAsia, AsiaAsia X, Tony Fernandes et al - when it comes to PR, glossy adverts, impression, they are way up there. The man and companies who could do no wrong. Just do a casual searchand you'll see how fawning journalists write glowing reports about them.

Here are some of the facts:
IPO Price: 1.20 (July 2013)
Today's Price: 0.21. Or, - (minus) 99 sen
In less than 2 years, investors who `were lucky' and had gotten AAX through balloting, and had held on, have lost 82% of their capital. This is even worse than Felda Global Ventures' (FGV) share price performance.

If you'd look at previous reports by various so-called `investment pros and analysts', wide-eyed journalists and comments by mainstream investors comments (i3investor.com is a good place), many had believed Tony Fernandes is a sort of magician, miracle worker, someone who could walk on water even.

After all, AirAsia had gone from an IPO price of 1.20 in June 2010 to its peak at 4.20 in August 2011 - a 250% profit in just 14 months later! Your RM10k investment would have become RM35,000. Their investment in AAX - it was in the naive belief that "Anything that has to do with Tony Fernandes is bound to achieve greatness!"... "I fully believe in Tony Fernandes! He's Da Man!"...

AAX's capital-destroying performance from listing until today.

But in less than two years, Air Asia X was already facing severe cash flow problems. It had to call for a rights issue. In layman's term, this is when a company asks investors to cough out additional cash. This isn't a bad thing if the proceeds are to be used to expand a business - to buy income-producing assets, for instance, which will result in bigger profits in the future. But not when it's to make up for shortfalls. That's a clear indication the management had failed.

This post isn't to disparage Tony Fernandes - I have better things to do lah. I'm just stating the facts, of what things are. And, more importantly, to explore possibilities to make some money. "And what might these be?", you might ask.

Well, consider this - when it comes to share prices, the most critical factor isn't really how well or badly a company is doing, although these do influence things, of course. It's "perception", "sentiments" and the all-important "trend" - of whether the bias is upward or downward. These are way more important than things like Price Earning Ratio (PER), Dividend Yield, Net Tangible Asset, Gearing etc. Let the accountants-type and analysts at the research departments of investment banks worry about these.

So, back to AAX: let's look at it this way - buying it at 0.21 now is better than two years ago, at 1.20. Same stupid unit of the same company but at an 82% discount. It doesn't mean one will definitely make a profit, of course, for it's ALWAYS possible for "cheap" to become "cheaper". However, I'd fancy my chances at this price. Should it climb back to just 0.42, those original investors with their 1.20 units will still be way under water. But you'd be making a 100% profit!

Learn the basics about technical analysis. You can also utilise the free version of ChartNexus, for example. If you see AAX having reached its bottom, and possibly starting on an uptrend, that's a great opportunity to try make some money.

Screenshot of AAX from the ChartNexus desktop software. Basically, one shouldn't try "to catch the bottom" and buy when the current price is lower than the 20-day and 50-day Moving Averages (red and blue lines respectively). Even though it feels "like a bargain", as shown above.

Disclaimer: I'm no expert when it comes to the stock market and technical analysis. Or whatever analysis for that matter. I'm writing this for the sole reason that I have a big mouth and simply don't know how to keep quiet. So, if you were to buy AAX based on this post - and then make a loss - don't come looking for me with a big stick ala Walking Tall, okay? BUT if you do make a profit, you're more than welcome to share it with me :-)